Between November and March, hedging programs at variable annuity firms supported 94% of their guarantees, up from 93% in the prior period, Milliman said.

Given the favorable experience of hedging programs, many life insurers have expanded their hedging programs to increase the security of their capital base.

“The success of hedging programs has caused companies to look more closely at their unhedged risk and to determine how to use hedging to better manage those risks,” said Ken Mungan, head of the financial risk management practice at Milliman.

Responding to the volatile market, variable annuity providers are no longer offering so many guarantees as they were through the last quarter of 2008.

Milliman said that of the 33 companies that have recently modified their variable annuity offerings, 29 are increasing fees and 19 will scale back product designs.

“After a period of intensely focusing on product design in the interest of winning new business,” Milliman said, “companies are instead looking at their pricing and benefit richness and returning to the original variable annuity value proposition, which holds that VAs offer a floor upon which people can build their retirement security.”

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